Loan Brokers May Leave You Even More Broke, Critics Warn

Consumers Urged To Think Twice About Loan Brokers Who Want Money

First

Would-be Borrowers Burned

When Loan Fees Go Poof

Dennis Sharp had filed for bankruptcy in 1989, so when he needed emergency repairs on his truck last February, he found that banks didn't want to talk to him about a loan.

Sharp, a truck driver from Plainville, decided to go to a so-called advance-fee loan broker, a company that offered to find him a loan for a fee paid upfront.

He said he gave American Financial Consultants of Berlin $200 after being assured it had found a lender willing to loan him $2,000.

"I went and paid a $200 fee and waited and waited, and I haven't gotten anything yet," Sharp said.

Sharp didn't know that Paul Scavitto, one of American Financial's owners, had been targeted by Connecticut and Massachusetts officials because of his loan brokerages' practices. The Connecticut attorney general has accused Scavitto of violating an agreement to repay fees to dozens of consumers who never got the loans they expected.

Sharp also didn't know that advance-fee loan brokers have been generating hundreds of complaints and inquiries to Better Business Bureaus around the country, including Connecticut.

About a quarter of the nation's 180 Better Business Bureaus recently identified such brokers as a proliferating source of consumer complaints.

In August 1990, the national Council of Better Business Bureaus in Arlington, Va., issued an advisory warning consumers and businesses to be leery of paying advance fees to loan brokers.

The local bureau in Fairfield issued a similar warning July 25 after it received complaints about a Stamford broker. It also has been receiving inquiries from Maine, California, Arizona and Ohio about another broker that opened in Greenwich a few weeks ago.

"Once they have your money, you don't know what they're going to do for you, if anything," said the Fairfield bureau's president, Alvin E. Kerstein. "Chances are they will do nothing for you

whatsoever except cash your check."

On July 1, a Florida law took effect prohibiting loan brokers from accepting fees before applicants obtain their loans. Connecticut Attorney General Richard Blumenthal says he will ask state lawmakers to enact a similar law next year.

The region's troubled economy has led to an increase in the number of loan-brokering firms, making the problem more widespread. On Monday, nearly a dozen ads for loan brokers could be found in The Courant's classified section. Joseph Muro, telemarketing manager for the newspaper's classified advertising department, said The Courant is consulting with state banking officials on whether to continue accepting the ads or to publish a notice advising readers to check out such companies before doing business with them.

Advance-fee loan brokers are not the same as mortgage brokers or direct lenders that may require a payment as an application fee or for inspections or appraisals.

Loan brokers advertise the availability of unsecured loans to consumers or businesses, especially to those who have no credit history or have a poor credit rating. They advertise on radio and television in addition to newspapers. Would-be borrowers are asked to call a toll-free number and provide financial information.

Callers typically are asked to provide a variety of information, including credit history, work experience and salary. Some of the brokers say applicants can qualify as long as they haven't declared bankruptcy within a certain period, which can vary from broker to broker.

Those who qualify are asked to return an application along with an advance payment, which can run several hundred dollars for consumers and as much as $10,000 for businesses.

What the callers don't realize, say government and business officials, is that prospective borrowers who are told they "qualify" are not being qualified for a loan; rather, they qualify for consideration by one or more lenders with whom the broker supposedly is affiliated.

Critics say callers intentionally are left with the mistaken impression that their loans have been approved.

As Jerry McGoldrick of Manchester found out, being qualified doesn't mean getting a loan.

In May, McGoldrick sent $199 to Affiliated Financial Systems Inc., a now-defunct Florida loan broker that told him he was qualified to borrow $10,000. After repeated telephone calls and assurances that the loan was being sent to him by overnight mail, McGoldrick in June received a letter from a lender, Moneyline America Inc. of Washington, D.C., saying he had been turned down.

Moneyline sent the same letter to Frances Hall of New York City, who gave $249 to Rapid Financial, a broker in Stamford. Moneyline also was the primary lender for American Financial Consultants, the broker for Sharp, the Plainville truck driver.

Brenda Jimenez, spokeswoman for the Better Business Bureau in Washington, D.C., said Mark Evans, president of Moneyline, also is president of Affiliated Financial Systems in Florida and another Florida company that offers loan-brokering services around the country.